As a marketer prognosticating doom and bloom for the hotel industry in its fight against alternate lodging companies, it is with great relief to read that the New York state legislature is moving this week to enact a law that forbids the advertising of short-term rental accommodations such as Airbnb.
Of note, advertising as outlined in this bill includes websites and other mainstream digital channels. The law also comes with some very sharp teeth, with fines ranging from $1,000 for the first offense, and up to $7,500 for the third or any subsequent violations. Enforcement for cities with over one million citizens – in essence, New York City, the market which brought this issue to the foreground – is done at the municipal level, ensuring a nimbler and more effective level of compliance.
Alas, while we as hoteliers have long trumpeted the deleterious impact that alternate lodgings have had on our occupancy levels and branding, it is the suffering of the housing market which may finally spur our local politicians in the action. And the real estate plight is no more so apparent than in North America’s single largest battleground – the Big Apple.
While this law is awaiting the governor’s approval, there has been intense efforts by Airbnb to stall its signature. Undoubtedly, lawmakers will consider these lobbyist cries, but governments, like all organisms or organizational bodies, tend to align themselves with actions that will ensure their survival or, in this case, get them re-elected. Siding with Airbnb against the masses of citizens now blistering with anger over deteriorating housing availability concerns in such a prime locale as New York City is a non-starter.
This thrust in the quarrel against Airbnb is a new leg by which hoteliers around the world can petition for similar actions in their respective territories. Laws are, after all, designed primarily to protect the economic interests of individuals, and this is a clear case of harm in that regard.
Recent analysis indicates that the short-term rental boom, triggered by easy access to available inventory through the internet, has financially motivated property owners to seek higher profits through this stream over others. In simpler terms, why rent out your apartment for, say, $3,000 per month (roughly $100 per day), when you can get double or triple that amount in a daily rental pool. In this scenario, anything north of 50% occupancy and you’re ahead of the per-month baseline. Furthermore, in many cases, daily rental rates could be at a much higher multiple when yield management – the equivalent of Uber’s surge pricing – is fully utilized.
I’m not blaming the sellers, as they’re simply using arbitrage to seek the best return on their investments. Moreover, with internet rentals, there is no one skipping out on payments nor is there an issue with long-term lease obligations. Sure, there is some risk of failing to show a return in excess of monthly rentals, but savvy operators can adeptly manage through this.
In most major markets, housing supply is already constrained. Property prices have been escalating at rates well beyond what’s deemed as healthy inflation. Airbnb’s success only adds kerosene to this already well-stoked fire. By aligning the interests of hotels with real estate all over the world, this is the pincer move that will win us the field.
It is interesting to note that this discussion has been devoid of any real mention of the hotel industry and the specific quandaries that we may have with alternate lodging providers.
Does that mean that hoteliers are off the hook insofar as pursuing further sanctions against Airbnb and its ilk? Hardly! This housing market argument should serve as a catalyst to further efforts by hoteliers and their associations to push for similar local legislation, or at the very least to rekindle the discussions to that effect.
New York has set the pace; now it’s time for us to follow this state’s lead. Or maybe I’ve just been sniffing too much of that proverbial kerosene and this is a one-off example. Either way, sound off with your thoughts in the comments.
(Article by Larry Mogelonsky, published by Hotels Magazine on June 28, 2016).